In Speech, Hatch Outlines Opposition to Debt Limit Deal
WASHINGTON – In a speech on the Senate floor today, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, commended Republican leadership and conservatives for changing the conversation in Washington on deficit reduction but said the compromise negotiated between congressional leaders and the Obama Administration did not go far enough to sufficiently slash the nation’s $14 trillion debt.
“There are some achievements in this proposal that conservatives can hang their hat on. But I regret to say that I will not be able to support this proposal because it does not sufficiently provide us with the solution to the debt crisis that the markets are demanding,” said Hatch, who noted the real threat to the nation’s triple A rating was not default but a failure to get federal spending under control.
Hatch continued, “In my view there is a solution to this spending crisis. It is Cut, Cap, and Balance. In addition to providing short term relief by cutting and capping spending, it provides for a long-term solution through passage of a strong Balanced Budget Amendment. This proposal falls well short of Cut, Cap, and Balance and I cannot support it.”
Below is the text of Hatch’s full speech delivered on the Senate floor this morning:
Mr. President, we are coming down to the wire here. We will soon be voting on a proposal that would couple some deficit reduction with an increase in the statutory debt limit. There are some positive features in this legislation, and the Senate’s Minority Leader, the Speaker of the House, and conservatives throughout the country should be commended for insisting on them.
First, the President asked for a clean debt limit increase, and conservatives refused. They held the line and made clear that any increase in the debt limit required matching deficit reduction.
Second, having lost the fight over a clean debt limit increase, the President insisted on a balanced approach to deficit reduction, by which he meant reducing the deficit by raising taxes. But conservatives again fought this back. They knew that the primary driver of our debt is spending. Regardless of the President’s talking points, non-defense discretionary spending is at historic levels. We are set for our third straight trillion dollar deficit. We have a national debt of $14.5 trillion, and the President’s budget would give us $13 trillion more in debt. The answer to this is not giving the government more money to spend.
And third, conservatives resisted the effort by the President’s allies to push most of the deficit reduction in this package down the road.
So there are some achievements in this proposal that conservatives can hang their hat on.
But I regret to say that I will not be able to support it, because it does not sufficiently provide us with the solution to the debt crisis that the markets are demanding. Last week, Moody’s made clear that the real threat to America’s Triple A rating is not default, which even the administration now acknowledges was never going to happen. The real threat of a downgrade comes from a failure of will. It comes from a failure of presidential leadership in getting federal spending under control.
There is a solution to this spending crisis. It is Cut, Cap, Balance, which I was an early supporter of. In addition to providing short term relief by cutting and capping spending, it provides for a long-term solution through passage of a strong Balanced Budget Amendment.
This proposal falls well short of Cut, Cap, Balance, and I cannot support it.
I would like to address a technical point about this package that raises concerns for me — whether the President is looking to the deficit reduction Committee as an opportunity to raise taxes. He says that he is, as have some of my colleagues in the Senate.
I do believe that it will be very difficult, given the Committee’s charge to reduce the deficit, to raise marginal tax rates. However, I worry that some Democrats will be looking at tax expenditures in order to hit the Committee’s required deficit reduction targets.
This would be a mistake for a number of reasons. The President has referred to tax expenditures as “spending through the tax code.” But rhetoric aside, tax expenditures are an opportunity for individuals and businesses to keep more of the money that they earn. And getting rid of tax expenditures, without corresponding reductions in tax rates, will result in a net tax increase on the American people.
The President would have you believe that getting rid of tax expenditures is acceptable, because they only impact the rich. That is why he talks about bonus depreciation for jets and yachts used as second homes. Yet in a series of speeches, I have attempted to show that this rhetoric of class warfare might work politically, but as a description of tax reality it is lacking. The fact is, the largest tax expenditures, those that the President and Democrats would have to look to in order to raise revenue for deficit reduction, benefit middle class itemizers the most.|
Consider the example of the home mortgage interest deduction. This is the most significant of the itemized deductions available to taxpayers. The mortgage interest deduction is the second largest tax expenditure identified by the Joint Committee on Taxation, and it is not primarily a benefit for the wealthy. Thirty percent of the benefit of the mortgage interest tax expenditure goes to taxpayers over $200,000. Taxpayers with income below $200,000 receive 70 percent of the benefit of the mortgage interest deduction. By a ratio of almost 2 to 1, taxpayers under $200,000 benefit from the mortgage interest deduction. Since $200,000 basically fits the definition of rich used by my friends on the other side of the aisle, we can see that the non-rich or middle income group disproportionately benefit from the mortgage interest deduction.
The larger point is this, however. To the extent that the home mortgage interest deduction, or any tax expenditure for that matter, should be addressed by Congress, it should be addressed through the context of a comprehensive, revenue neutral tax reform that lowers rates. These tax-expenditures should not be cherry-picked by the President and his liberal allies to pay for the giant checks that his administration has written.
Mr. President, I would like to make a last procedural point about where we go from here. Even if Congress passes, and the President signs, this deficit reduction package, we are going to be back at this again before the year is out. The President will be asking Congress to raise the debt ceiling again. Given that, I would like once again to address the failure by the Treasury Department to respond to repeated requests I have made over the past week about Treasury’s short-term cash position, and the failure by almost every member of the so-called Financial Stability Oversight Council — or, F-SOCK — to provide Congress with information about their contingency plans in the event there is a ratings downgrade on U.S. debt in the future.
Does Treasury still think it will run out of cash by midnight tonight? I have been given only limited information. Treasury continues to say we will run out of cash today and will not be able to pay our bills, the same date they estimated way back in May. But, Treasury won’t show me how they are arriving at that estimate. I have not been informed, Congress has not been informed, and Americans counting on timely Social Security payments have not been informed. Almost every member of the F-SOCK, including Treasury and the Federal Reserve, has refused to provide me with any information about their contingency plans for ratings downgrades. Even if the debt limit is raised, there is no assurance that we won’t face a downgrade. We need to know the government’s plans.
Mr. President, as I have said repeatedly, this is unacceptable. I want to be clear about two things. First, Congress will have to look into this matter very carefully, and investigate whether Treasury and most of our major financial regulators have been deliberately withholding information from Congress, and if so for what purposes.
Second, assuming that down the road Treasury will present Congress with another default date, I want to put them on notice that this fall I will be demanding timely substantiation of Treasury’s assessment and the government’s cash position. Absent this cooperation, I will stand in the way of any debt limit increase demanded by an unsubstantiated Treasury-determined deadline.
Mr. President, in closing I want to be clear. I cannot support the outcome of these negotiations. But my opposition is not owing to the failure of conservatives or the Republican leadership in the House and Senate. It is owing to what is clearly amounting to the failed presidency of President Obama. He and his allies are ideologically committed to more spending. Fortunately, the American people will have the final verdict on this economic philosophy in 2012.
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